Daily update
Daily update
- Economists regard transitory inflation as lasting 12 months. Politicians expect transitory inflation to last 12 weeks. Yesterday’s US consumer price data supported economists’ views, with inflation slowing or moving into deflation where it was expected—goods where demand is normalizing. Service sector inflation was mainly a commodity price disguised as a service, namely air fares.
- US March producer price inflation is more relevant for corporate pricing power. Producer prices have a lower labor component than consumer prices, and as labor has been a moderating factor for inflation, this argues for higher numbers today.
- Chinese trade data suggests that COVID-19 restrictions are: a) Not a lockdown; and b) More a domestic demand shock than a global supply shock. Imports unexpectedly fell 1.7% y/y, suggesting weaker domestic demand, but not a lockdown; in March 2020 import numbers fell over 10%. Exports rose more than expected—lunar new year effects plus normalizing global demand for goods slowed growth, but the data does not suggest too many problems making and shipping product.
- UK inflation data continued to rise, as expected. Prime Minister Johnson became the first sitting prime minister to be fined for a criminal offense. Markets are unlikely to react—any change in prime minister is unlikely to change policy.
